First you have to cut a piece of leather into a circle, then cut a circle out
of the center.

I make my circles 13" wide with a 2" cut out in the center. The
one pictured is smaller for demo purposes.

(Click pic for larger version)

Then cut a small tail, going from left to right, with the grain side of the
leather facing up.

Make the tail about 3" to 4" long for ease of handling.

(Click pic for larger version)

Determine the size you want by the space between the razor blade and the
center hub of the lace cutter.

For the smallest lace, use the last slot with the
blade placed closest to the center of the hub. Thread the tail into the slot.

You may have to use a small pin to push it through...being careful as to not
touch the razor with the pin.

This will put a nick an the blade and make it very
difficult to cut the lace.

(Click pic for larger version)

Once you have the tail through the slot, place your index finger against the
back of the hub,

while using a slight pressure to push the leather up from the
cutting slot.

Pull slowly and evenly on the tail until it starts to move freely.

This will take a few pulls, as once the inner circle gets bigger you can pull on
the lace much faster.

(Click pic for larger version)

The more pressure you apply to the leather on the back of the hub while
pulling

will actually help to stretch the leather a bit, and the finished lace
will be a bit smaller.

The finished lace. This lace measures 3/16".

(Click pic for larger version)

To make such a small lace, you have to start with thin leather. This
was made with 1.5oz garment hide. You also have to check the hair side of the
leather for scars or veins that you can't really see on the grain side. Cut your
circle from a clean un-scarred area, as the scars will rip apart when you are
pulling the lace through, and it gets very annoying, and your lace length will
only be about a foot long.

A 13" circle will make about 140' of 1/8" or 75' or 1/4" lace, and is WAY WAY
cheaper than buying a pre-made roll from the local leather supplier.
It takes a bit of practice to get it right, but once you do get the hang of
it you can save a ton of money by making your own lace. The important thing is
to make sure you don't have any scars on the piece of leather you are trying to
make lace with.

How do you usually cut that tail? I have so much trouble cutting that
arc with scissors.

I cut it with scissors. I know it can be hard to cut that direction, if you flip
the leather over, you can cut it to the right, but be sure you flip it back to
run through the lace cutter.
If you have some that has an un-even edge, it is most likely only on the one
edge, and one edge is straight. What I have done is re-pull the lace through
with the un-even edge the one that gets cut by the razor. You will need a bit of
practice on this as well, as you have to put index finger pressure on the lace
so it follows the even cut side. When you pull the lace through, pull it so that
you are putting pressure on the lace cutter core, away from the razor edge.

How does one cut 1/4" lace with one of these? Mine only seems to have two
slots for the razor...

The cutter has two slots for the blade, and it also has 4 grooves for the
leather to run through.

What you need to do is to place the razor in the furthest from the core slot,
and use the second from the top groove. This should give you 1/4" lace.

Depending on how much tension you apply, will also determine the width of the
lace to some degree.